2024 (9) TMI 71 - AT - Customs

Overvaluation of goods - Rejection of declared export value - re-determination of value - Confiscation of goods u/s 113 (h) (i) of CA - penalty u/s 114 and 114AA - restriction on fulfillment of export obligations to the extent of re-assessed value - sole basis for the rejection and re-determination of value was the report by the Chartered Engineer - HELD THAT - The EPCG Scheme allows exporters to import capital goods on nil/concessional rate of duty subject to the condition that using that machinery then exporter manufactures and exports goods for several times the value of the duty forgone on the capital goods. The export obligation to be fulfilled is indicated in the licence by the DGFT. The duty forgone on the capital goods is the amount of duty assessed by the customs officers as payable, but for the licence - the export obligation has to be fulfilled by exporting goods of value (Free on Board FOB) of a number of times of the duty forgone as indicated in the licence. What the officer decides is the assessable value of the goods under the Customs Act. In the normal course, the transaction value is the assessable value. However, there are exceptions under section 14 read with the Valuation Rules. The Valuation Rules indicate conditions under which the proper officer can doubt the transaction value and reject it. If the transaction value is rejected as the assessable value, then it has to be determined under any of the other methods provided in the Valuation Rules. If the obligation under the Foreign Trade Policy is with reference to FOB value, it can only mean the FOB value as per the agreement between the buyer and the seller which remittance the exporter is also mandated to bring into India as per the FEMA. Whether the Additional Commissioner was correct in rejecting the declared value and re-determining the value under the Customs Valuation Rules based on the Chartered Engineer s certificate? - HELD THAT - The only basis for alleged over-valuation is the statement of Shri Santosh Kumar Sinha. Even in his statement, he asserted that remittances have been received as per the value declared in the shipping bills in the past in the account of the exporter - The cost of manufacture of the goods could be much lower than the export price. What needs to be checked is that the values are consistent on the values of goods like, kind and quality exported to other buyers. There is no information about export to other buyers and the appellant s own exports in the past are also said to be over valued. This also on record that remittances in respect of the past shipping bills were received and there is no evidence of flow back to the buyer in UAE. There was no reasonable doubt regarding truth or accuracy of the transaction value in this matter. The transaction value, therefore, was wrongly rejected under Rule 8 and re-determined based on the cost of manufacture of like articles in India as per the Chartered Engineer s certificate. The value declared in the shipping bills deserves to be accepted. The question of confiscation, fine, penalty etc., therefore, become immaterial. The impugned order deserves to be set aside. Appeal allowed.

Summary

Issues Involved:
1. Rejection of declared export value and re-determination of value.
2. Confiscation of goods under Section 113(i).
3. Imposition of penalties on Universal and Vikas.
4. Restriction of fulfillment of export obligations.

Detailed Analysis:

1. Rejection of Declared Export Value and Re-determination of Value:
The primary issue was whether the Commissioner (Appeals) was correct in upholding the Additional Commissioner's decision to reject the declared export value of Rs. 1,45,21,020/- and re-determine it as Rs. 2,75,400/-. The EPCG Scheme allows import of capital goods at nil/concessional rate of duty subject to the condition that the importer exports goods manufactured using the machinery. The export obligation must be fulfilled in terms of FOB value of the exported goods. The Tribunal found that the customs officer does not and cannot alter the transaction value but can only reject it and re-determine the assessable value through other methods prescribed in the Valuation Rules. The Tribunal noted that the only basis for alleged over-valuation was the statement of Shri Santosh Kumar Sinha, which did not provide sufficient grounds to reject the transaction value under Rule 8. The Tribunal concluded that there was no reasonable doubt regarding the truth or accuracy of the transaction value, and it was wrongly rejected under Rule 8.

2. Confiscation of Goods under Section 113(i):
The Tribunal examined whether the confiscation of goods under Section 113(i) was justified. The Additional Commissioner had confiscated the goods and allowed their redemption on payment of a fine of Rs. 35,000/-. The Tribunal found that since the transaction value was wrongly rejected, the confiscation of goods under Section 113(i) was also incorrect. Consequently, the confiscation order was set aside.

3. Imposition of Penalties on Universal and Vikas:
The Additional Commissioner had imposed a penalty of Rs. 12,00,000/- on Universal under Section 114 and a penalty of Rs. 50,00,000/- on Vikas under Section 114AA. The Tribunal found that the penalties were based on the incorrect rejection of the transaction value. Since the transaction value was accepted, the penalties imposed on Universal and Vikas were deemed unjustified and were set aside.

4. Restriction of Fulfillment of Export Obligations:
The Additional Commissioner had restricted the fulfillment of export obligations to Rs. 2,75,400/-. The Tribunal noted that the export obligation under the EPCG Scheme is with reference to the FOB value as per the agreement between the buyer and the seller. Since the transaction value was accepted, the restriction on the fulfillment of export obligations was also deemed incorrect and was set aside.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeals with consequential relief to the appellants. The declared export value of Rs. 1,45,21,020/- was accepted, and the confiscation of goods, imposition of penalties, and restriction on the fulfillment of export obligations were all deemed incorrect and were set aside.